Difference Between Up Selling And Cross Selling & How They Benefit Your Business

‘Strategy without tactics is the slowest route to victory’, was said by Sun Tzu, many centuries ago.

In this age, this adage still holds true. In businesses, you cannot succeed without proper strategy, tactics and the benefits that come along with them.

With the rise of modern tools like CRM, the B2B selling landscape will change, as will the strategies to tackle it. That is why tactics like up-selling and cross-selling are gaining tremendous importance.

Owing to their numerous benefits, they are likely to become more vital to the sustainability of your business in the near future.

In this article, we will discuss everything about cross-selling and up selling along with their differences and benefits.

Let’s dive right in!

What is upselling?

Suppose you run a car accessories shop. A customer walks in, looking for foam upholstery for their car seats. You advise them not to go for a foam upholstery, citing reasons like inferior quality and a low shelf-life. You suggest them to go for leather upholstery instead. It is much better in quality and has a higher lifetime than foam. They will also get brightness and shine, and superior resistance to wear and tear. Your customer is influenced and end up buying leather upholstery.

This is called upselling. When a customer comes to buy a certain product, and you influence them to go for a higher-priced product, it is defined as upselling. In this case, leather upholstery is much higher priced than foam.

In the case of upselling, the seller tries to sell not only higher-priced products but accessories and add-ons as well.

A sustained upselling strategy can lead to a significant rise in revenue for a business.

Up-selling business

Dollar Shave Club is an example of successful upselling online.

When you start browsing the site, a highly-optimized landing page greets you, and offers two pricey, value-added options in addition to the famous “dollar shave.”

Why is upselling important?

Jeffrey Gitomer defines upselling as ‘helping your customers win’.

Upselling has many benefits that aren’t discernible from the outside. But once you go deep into it, you see that it’s got plenty of potentials.

1. Accelerate growth

Have a look at this example from SaaS companies, who are targeting new customers. 

Saas-upsell-profitability

Here, as you can see clearly, upselling would be more profitable for them. It’s much easier to sell to your existing customers that target new ones. And when you target existing customers, it is very easy to upsell, primarily because they know and trust you.

And when you upsell, you boost your revenues and help accelerate your own growth.

2. Customer lifetime value increases

When you upsell and try to offer value, customers understand and appreciate it. Your customer lifetime value is positively impacted and fosters a long-term partnership, which can pay rich dividends to you for many years.

3. Flexibility

Many customers do not want to visit a new place when they are looking for a particular product or service. When you offer them more choices and add-ons, upselling in short, they do not have to try a new company to get what they need. You can retain your customers while offering them a wide range of products. The flexibility to be able to choose what they want will attract customers.

What is cross-selling?

Suppose you run a computer shop. A customer comes in to buy a laptop, and you show him your stock. During checkout, you suggest them to buy a mouse and a pen-drive. The customer mulls over your suggestion, and finally, buys them as well.

This is called cross-selling. When you sell a customer a product or a service in addition to what they are looking for and came to buy in the first place, it is called cross-selling.

Another example would be a life insurance company, trying to get its customers to buy car insurance or health insurance.

In essence, cross-selling is a selling technique that tries to get the customer to pay more, and buy a product related to one that they have already bought.

Does cross-selling really work?

Amazon reportedly attributes as much as 35% to their options like ‘frequently bought together’ or ‘customers who bought product A also bought product C’. This is a great example of cross-selling.

Cross-selling works, and marvellously well. The key to cross-selling is making the customers see the ‘value’ they are being offered when they buy the other product. You have got to tell them what’s in it for them.

A great strategy to succeed with cross-selling is not handing out some magazines to read but making the leads visualize the benefits for themselves.

If you still have any doubt about cross-selling, take a look at McDonald’s. With their famous one-liner question when you order something at the counter, ‘Would you like some fries?’, McDonald’s is now able to sell 9 million pounds of fries all over the globe every single day.

These incremental sales accounted for an additional $28 million in revenue in 2014.

Difference between upselling and cross-selling?

Upselling and cross-selling are just two means to the same end: increased revenue. Acquiring a new customer can be up to 5 times more costly than selling to your existing customer base, so businesses try to increase the average revenue per customer. And two of the best ways of doing that are up-selling and cross-selling.

There is a thin line of difference between what these two terms mean. Let’s look at an example.

Suppose you visit KFC for dinner. At the counter, you ask for a burger and fried chicken. The employee asks you if you want to pay 1 dollar and turn your order into a ‘meal’, with additional food items.

This is an example of up-selling. Suppose they offer you a coke and fries as the additional items. This is an example of cross-selling. 

A great example of cross-selling can be studied about Speedo.

cross selling examples

When you visit their website and add an item in their cart, a pop-up comes on and shows you ‘Exclusive offers of the day’, aimed at making you buy. The terminology used also increases the urgency of the offer.

Fragrance.com uses packages and offers you very attractive upselling deals when you visit their website.

Up selling example

How do they benefit a business?

Upselling and cross-selling can benefit businesses positively when used in a proper manner. 

When you visit a restaurant, and the waiter asks for if you would like any soft drinks or dessert, they are essentially cross-selling and upselling their items to you. It can be something as simple as that but needs careful thought and execution, when part of a long-term, sustained business growth strategy.

But why do we need to cross-sell and upsell in the first place? 

Well, the e-commerce conversion rate is at a woeful 3%. For every 100 customers who visit your website, only three are likely to make that final purchase.

ecommerce-conversion-rate

To have a sustainable business, it’s time to look at the customer lifetime value of existing customers and work on retaining them. And also increasing average customer revenue. Here, these two techniques can provide wholesome benefits.

Let’s look at Sephora, a company that uses upselling and cross-selling to great use.

example of upselling and cross-selling

When someone visits the beauty powder page, there is a small display that directs you to things you can ‘use it with’. It points towards a simple sponge for concomitant use.

This is a very simple and effective method and a very convincing one at that. People end up paying $10 to $15 more on the additional item.

Just think about the impact it could have when its extrapolated to thousands of customers.

Here are some tested and proven benefits a business can enjoy with upselling and cross-selling:

1. Long term association

Customer value is at the center of upselling and cross-selling.

When you offer your customers value, your customers appreciate it. A long-term partnership can develop, leading to sustained benefits enjoyable over a long time.

2. Customer equity building

When you focus on upselling and cross-selling, you build customer lifetime values (CLV). The customers are the heart and soul of any business, and with better CLV values, your customer equity increases.

With increasing customer equity, your revenue and profitability will both be positively impacted.

3. Increases average revenue per customer

In this era of cut-throat competition, running a sustainable business can become very costly and sometimes, revenue may dry up.

Upselling and cross-selling skills are essential in this scenario since they help to increase the average revenue per customer.

So, even if a few customers are not purchasing, your total revenue can meet your pre-determined standard.

4. Increase customer satisfaction

The rule of any business is taking care of your customers. When you try to offer your customers value, they will appreciate you for it. When you upsell and cross-sell, you are essentially making sure that they get their value for money, and they get allied products that they need to use the primary product that they bought. This can stem customer base erosion, and stop them from switching to other business. Overall, it can improve customer satisfaction.

Wrap-Up

There are a lot of other benefits that cross-selling and upselling can provide a business. They promote innovation, enhances customer benefits and help the business maintain a healthy ratio between existing and new customers. 

With customers looking for more and more value with every purchase they make, intense competition all around, and customer behaviour to look for all products and services under an umbrella, there is tremendous potential for businesses using cross-selling and up-selling. And they are here to stay!

 

 

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About Deepti Jain

Deepti is a senior content writer with AeroLeads. She spends a lot of time brainstorming ideas and writing marketing and sales content. She also has a knack for writing and reading about politics and prevalent social issues and regularly pens letters to the Editor of The Hindu newspaper. When she is not working, you’ll find her socializing with friends or binge-watching Netflix. (And devouring sushi).

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